AI’s Perspective on Digital Assets and Blockchain Technology | by Jonny Fry | May 2023

Written by James Tylee Founder Cyber.FM

Understanding cryptocurrencies and blockchain technology can be daunting for the average person. Therefore, Artificial Intelligence (AI) tools like ChatGPT can help explain complex concepts like the tokenomics of a cryptocurrency and the conversion of digital assets on a blockchain to non-technical readers. In this article, I will ask ChatGPT to provide a clear definition of the difference between a digital asset and a cryptocurrency and offer examples and analogies to aid understanding. Let’s see how this goes:

JT: Can you outline the difference between a cryptocurrency and a digital asset that can be stored on a blockchain?

ChatGPT: Certainly! While both cryptocurrencies and digital assets stored on a blockchain share some similarities, they have different purposes and characteristics. Here is a brief overview of the differences between the two:

Cryptocurrency:

1. Purpose: Cryptocurrencies are digital or virtual currencies that use cryptography for security and operate on a decentralized system, such as a blockchain.

2. Decentralization: they usually have no central authority or issuing body, meaning transactions are peer-to-peer and rely on network consensus.

3. Examples: Bitcoin, Ethereum and Litecoin are well-known cryptocurrencies.

4. Function: cryptocurrencies serve primarily as a medium of exchange, a store of value and a unit of account.

5. Supply: cryptocurrencies can have a finite supply (eg Bitcoin’s 21 million cap) or an expanding supply based on predetermined algorithms.

6. Anonymity: some cryptocurrencies offer a higher level of privacy and anonymity for users, while others prioritize transparency.

Digital resource:

1. Purpose: digital assets are all digital representations of value or information that can be stored, transferred and managed on a digital platform, such as a blockchain.

2. Broad scope: digital assets encompass a wide range of elements, including cryptocurrencies, tokens, digital collectibles and smart contracts.

3. Examples: CryptoKitties (digital collectibles), Filecoin (data storage) and Chainlink (oracle network).

4. Function: Digital assets serve different purposes depending on their specific type, such as utility tokens, security tokens or non-fungible tokens (NFTs).

5. Ownership: digital assets often have unique identifiers that prove ownership and can be traded or transferred between users.

6. Programmability: some digital assets, such as smart contracts, are programmable and can perform predefined actions based on specific conditions.

In summary, while cryptocurrencies are a subset of digital assets that specifically function as digital money, digital assets stored on a blockchain can have a wider range of purposes and functions. Both share the characteristic of using blockchain technology for decentralization and security.

I decided to have some fun and add some personalization:

JT: I noticed you pointed out that decentralization usually has “no central authority.” Do you find it interesting that this is different from Craig Wright’s opinion on Decentralization for Bitcoin SV, even though the core code is that of Bitcoin?

ChatGPT: Yes, it is really interesting to note the different opinions about decentralization in the cryptocurrency community, especially when it comes to Bitcoin SV (BSV) and its creator, Craig Wright. While the core code of Bitcoin SV is based on Bitcoin, the vision and philosophy behind the two projects have diverged over time. Craig Wright, who claims to be Satoshi Nakamoto (the pseudonymous creator of Bitcoin), have a different interpretation of what decentralization means. He advocates a more regulated and legally compliant version of Bitcoin, which contrasts with the broader cryptocurrency community’s emphasis on decentralization as a means of resisting censorship and centralized control. Bitcoin SV aims to restore the original Bitcoin protocol, focusing on scalability and enterprise adoption. However, Wright’s opinions and the direction of Bitcoin SV have been controversial in the crypto community, especially given his claims and the centralization concerns surrounding the project. Some critics argue that Bitcoin SV is more centralized due to the influence of Craig Wright and other key players in the project, as well as the concentration of mining power. This centralization aspect is seen as antithetical to the original vision of Bitcoin, which sought to create a decentralized financial system with no central authority or single point of control. In conclusion, the differing opinions on decentralization, particularly between Craig Wright’s vision for Bitcoin SV and the wider cryptocurrency community’s perspective, highlight the ongoing debates and differing interpretations of the core principles underlying the technology.

I added the hyperlinks above, which definitely reveal the level of accuracy from OpenAI, and I really appreciated how it handled a somewhat controversial topic without showing any (perhaps developer-supported) bias. Importantly, while using a virtual private network (VPN), “ChatGPT” on OpenAI’s platform consistently crashed between each question I asked. This forced me to “refresh” the page and ask the question again, but it is also necessary to click on the previous session established, otherwise much less memory would be retained. Why this only happens on a VPN is interesting! I wanted to cover Digital Assets a little deeper. The ability to trade crypto (which is apparently a priority “in this world”) has many of the same features as traditional financial tools and platforms.

JT: If in the future we can trade a stock, say Microsoft, in a regulated but decentralized finance (DeFi) type of blockchain-based environment, how would that compare to today?

ChatGPT: Trading stocks like Microsoft in a regulated, DeFi blockchain-based environment will introduce several key differences compared to the traditional, centralized stock trading system. Here is a comparison of the two:

Traditional share trading:

1. Centralized intermediaries: share trading usually takes place through centralized exchanges and

intermediaries such as brokers, clearing houses and depositories.

2. Trading hours: traditional exchanges usually have specific opening hours and are closed on weekends and public holidays.

3. Settlement times: settlement of share trades can take several days (T+1, T+2), which can introduce counterparty risk and inefficiency.

4. Fees: trading in shares often involves fees charged by brokers, market makers and other intermediaries.

5. Availability: access to global equity markets may be limited for some investors due to jurisdictional or capital restrictions.

DeFi-based stock trading:

1. Decentralized exchanges: trading will take place on decentralized exchanges (DEX) or decentralized platforms, eliminating the need for intermediaries.

2. 24/7 trading: decentralized platforms allow for continuous trading, without restrictions on opening hours or days.

3. Faster settlement: blockchain technology can enable near-instant settlement, reduce counterparty risk and increase efficiency.

4. Lower fees: DeFi-based stock trading can potentially reduce fees due to the absence of intermediaries and automation of processes using smart contracts.

5. Increased accessibility: decentralized platforms can provide wider access to global equity markets for investors worldwide, with fewer jurisdictional or capital restrictions.

However, the transition to a regulated DeFi-based stock trading environment will also involve certain challenges, such as:

1. Regulatory Compliance: Ensuring compliance with securities laws and regulations across different jurisdictions can be complicated in a decentralized environment.

2. Price manipulation and fraud: Decentralized platforms can be vulnerable to price manipulation, fraud and other forms of market abuse, which must be addressed to protect investors.

3. Security and Privacy: As with any digital platform, security and privacy considerations must be addressed to protect users’ data and assets.

In summary, trading shares in a regulated DeFi-based blockchain environment can potentially offer more efficient, accessible and cost-effective trading experiences compared to the traditional system. However, there are also challenges to overcome, such as regulatory compliance, security and fraud prevention.

It is clear that ChatGPT has not been updated since the German regulated DeFi platform, Swarm, already enables one to trade various ETFs and stocks, including Microsoft.

Well, there we have it! Whether or not, Digital Assets (whether stocks, bonds or home titles/deeds) show a potential to migrate to a distributed ledger world using smart contracts and blockchain technology. ChatGPT seems to think so. One thing that OpenAI made clear was that tools like ChatGPT should not be seen as a replacement for human financial advisors. Although they can provide valuable information and insight, they cannot provide personalized advice or take into account the specific circumstances and needs of each individual. Therefore, it is always recommended to consult with a qualified financial advisor before making investment decisions.

I’ve never interviewed a robot before, I guess that’s a first for everything…